Buying a home for the first time doesn't have to be as stressful as everyone makes it sound. Between your parents, friends, uncles, baristas and everyone else in between giving you advice from their experience, who do you listen to? Luckily, our comprehensive guide cuts through the noise and jargon so you can shop with confidence.
Check Your Credit Score
Whether you’re buying a home for the first time or third time, your credit will always play a crucial role in getting approved for a home loan. A good credit score will be very helpful in ensuring that you can secure a good loan. Your credit score is based on numerous things, such as how much credit you have available, how much credit card debt you currently have and if there is any record of late payments on your credit report.
While it is possible to secure a loan with a less than favorable credit score, you’ll have much better chances (and also get a better mortgage rate) if the score is high. So you might want to take some time to improve your score by doing things such as paying down debt before seeking to purchase a home.
Get Your Down Payment Ready
The next thing you should have ready before seeking to purchase a new home is your down payment. Most people assume that your down payment should ideally be 20 percent of the home’s price, but that is not always the case.
If you were attempting to get another type of mortgage, such as an FHA loan or a USDA loan, it is possible that you would only be required to have a down payment of anywhere from 0 to 10 percent.
Keep in mind that the 20 percent is ideal for a regular 30-year mortgage loan. You can actually go as low as 3 percent in some cases. However, it is also possible that you would incur additional fees if you have less than 20 percent, so you will want to do your research and be sure to ask the mortgage lender plenty of questions about your different loan options. This brings us to the next steps to buying a house.
Get a Mortgage Pre-approval
There is a lot that goes into learning how to buy a house, including understanding the mortgage loan process. Mortgage can be complicated, but getting a pre-approval is an important first-time homebuyer step to take because it accomplishes two things: It gives you a good idea of how much house you can really afford, and it lets sellers know you’ve taken one of the most important steps to buying a house and that you’re committed to making it happen.
During this step of buying a house, a mortgage lender will look at your credit score and finances and check your debt-to-income ratio.
Ultimately, this will tell you what the maximum monthly payment is you can afford for a mortgage and how much you will be approved for.
A mortgage pre-approval does not guarantee that you will get the mortgage, but it is one of the preliminary steps to buying a house used to determine whether you have a good chance of qualifying for a particular amount.
With Wyndham Capital's automated pre-approval letters, you can generate a letter for specific properties you're looking at - while touring the house.
Get a Real Estate Agent
When buying a home for the first time, one of the most important pieces of advice we can give you is to work with a real estate agent you trust. If you don’t already have a real estate agent in mind, now is the time to look for one. You want to make sure you get an agent that will work for the buyer; they’ll work hard to find houses that meet your criteria, provide negotiation advice and fill you in on a lot of other important things about the home buying process.
Look for Your Home
One of the most tedious steps to buying a home for the first time is actually finding one. Looking for your first home can be fun, but it can also be frustrating if you are having trouble finding what you are looking for. If you don’t find something right away, be patient, and maybe consider what features you can compromise on. Make a list of what you definitely want in a home and what you can do without if you have to. When showings come up for houses that meet your checklist, act quickly. Remember that other buyers are also looking for homes, so time is of the essence once you begin searching for a home to buy.
Make an Offer
Once you find a home you like, the next step in the home buying process is to make an offer. Your real estate agent will help you come up with the perfect offer that should appeal to the seller.
Related: 10 Tips for Buying Your First House
Get a Home Inspection
Assuming your offer was accepted, you’ll want to get a home inspection performed next. The home inspector will check out the house and provide you with a detailed report of everything that is of concern. If there are major issues, such as a bad roof, termites, mold or other things that would cost a lot to repair, you may want to reconsider buying the home or renegotiate with the current owners about lowering the price. Your real estate agent can step in and negotiate for you.
Complete the Mortgage Process
If you are fine with the home inspection, you’ve got the green light to continue on to the final steps to buying a house: the closing. This can include anything from providing additional financial information to getting an appraisal on the home.
Related: How to Get Your Appraisal Waived
The last of the first-time homebuyer steps to take is to go to the closing. You’ll sign some papers, and at the end, the keys to your brand new home will be handed to you. Now that you’re a homeowner, you can pass on the trials, tribulations and lessons learned to the next couple you meet looking for advice on how to buy a house.
Buying a Home For the First Time: When is the Optimal Time?
One of the most frequently asked questions when it comes to buying a home for the first time is, “When is the optimal time to buy a home?” While there is not a one-size-fits-all answer to this question, you can use the steps just discussed to determine the right time for you.
For example, the first step to buying a house is to check your credit score. Remember, the higher your score the better. Therefore, it is a good time to buy a home for the first time when your credit score is good. This will increase the likelihood that you will get a great loan for your home buying needs.
Next, you may also consider the down payment amount needed to secure your dream home. Do you have the down payment ready or do you need more time to save? This will determine when it is the optimal time for you to purchase a home.